Page 523 - Juta's Indirect Tax

BGR 016 (2) VALUE-ADDED TAX ACT: BinDing gEnErAL rULingS BGR 017
Notes:
1. The term ‘value’ excludes any VAT component.
2. ‘c’ in the formula will typically include items such as dividends and statutory nes (if any).
3. Exclude from the calculation the value of any capital goods or services supplied, unless supplied under a rental
agreement/operating lease (that is, not a nancial lease or instalment credit agreement).*
4. Exclude from the calculation the value of any goods or services supplied where input tax on those goods or
services was speci cally denied.
5. The apportionment percentage should be rounded off to two decimal places.
6. Where the formula yields an apportionment ratio/percentage of 95% or more, the full amount of VAT incurred
on mixed expenses may be deducted (referred to as the de minimis rule).
Conditions:
The aforementioned method is subject to the following conditions:
1. The vendor may only use this method if it is fair and reasonable. Where the method is not fair and reasonable
or inappropriate, the vendor must apply to SARS to use an alternative method.
2. Vendors using their previous year’s turnover to determine the current year’s apportionment ratio are required to
make an adjustment (that is, the difference in the ratio when applying the current and previous years’ turnover) within six months after the end of the nancial year.
4. Period for which this ruling is valid
This BGR applies with effect from 1 April 2015 and will apply until it is withdrawn or the relevant legislation is amended.
Group Executive: Interpretation and Rulings Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE Date of 1st issue: 25 March 2013
DATE: ACT: SECTIONS: SUBJECT:
Preamble
BINDING GENERAL RULING (VAT): NO. 17
27 March 2013
VALUE-ADDED TAX ACT 89 OF 1991 (the VAT Act)
SECTIONS 1 (1), 8 (2) AND 50
CANCELLATION OF REGISTRATION OF SEPARATE ENTERPRISES, BRANCHES AND DIVISIONS
For the purposes of this ruling –
• ‘BGR’ means a binding general ruling issued under section 89 of the Tax Administration Act 28 of 2011; and • any word or expression bears the meaning ascribed to it in the VAT Act.
1. Purpose
This BGR sets out the application of section 50 (3) regarding the cancellation of the registration of a separate enterprise, branch or division of the main enterprise (hereinafter collectively referred to as the branch enterprise) and whether such cancellation constitutes a deemed supply in terms of section 8 (2).
2. The law and its application
For purposes of the VAT Act, a vendor conducting a branch enterprise may apply in writing to the Commissioner to have such branch enterprise registered separately for VAT in terms of section 50 (1). The Commissioner may, in terms of section 50 (2), register any branch enterprise as a separate vendor provided that each branch enterprise maintains an independent system of accounting and can be separately identi ed either by the nature of its activities carried on or the location of the branch enterprise.
The separate registration of the branch enterprise results in its activities being deemed to be carried on separately from the vendor (hereinafter referred to as the main enterprise). Although section 50 (1) separates the main enterprise from its branch enterprise, it does not result in a supply of goods or services between the two enterprises at the time when such branch enterprise is separately registered.
The Commissioner may, for reasons set out in section 50 (3) (b), cancel the registration of the branch enterprise and the cancellation of such registration will be with effect from a date determined by the Commissioner. In addition, section 50 (3) provides that from the effective date of cancellation of the abovementioned registration, any activity that was carried on by that branch enterprise shall be deemed to be carried on by the main enterprise.
Section 50 (3) acknowledges that the cancellation of registration of the branch enterprise would give rise to a deemed supply envisaged in section 8 (2) and, therefore, provides that on cancellation of the registration of the branch enterprise, any activities of that branch enterprise shall be deemed to be carried on by the main enterprise. As a result, the provisions of section 8 (2) are not applicable at this stage. This only applies to the remaining activities of the branch enterprise.
* This exclusion only applies to a vendor that does not usually supply capital items on a regular basis as a normal part of the business, unless such items are supplied under an instalment credit agreement.
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